United States is No. 1 as Manufacturers Plan to Expand, New Deloitte Survey Shows
North American Manufacturers Are Bullish on NAFTA as Contributing to

Globally

WASHINGTON, June 18 /PRNewswire/ -- Despite intense global competition,
manufacturers consider North America the most desirable region for
expansion over the next three years, according to a new survey released
today by Deloitte.
The survey, Made in North America, targeted top-tier executives of
manufacturing companies with North American operations. Results showed that
these companies have expansion plans for a variety of operations, including
sales, service, research and development, and sourcing. While expansion
plans are global, North America -- especially the United States -- was
cited as the No. 1 likely location in the short term. Most surprisingly,
these manufacturers seem to have a renewed emphasis on North America as the
home for actual production facilities, hoping to turn around an area that
has been lagging.
In terms of the executives' agendas for expansion, the survey found
that sales and services topped the list with 76 percent planning to expand
sales in the United States, 58 percent in Canada and 67 percent in Mexico.
Sourcing of raw materials and parts (50 percent in China, 49 percent in the
United States, and 43 percent in Mexico) and production (44 percent in the
United States, 37 percent in Mexico and 37 percent in China) rounded out
the top three priorities.
Overall, the vast majority of respondents said North America will not
lose competitive ground in those areas over the next five years. And a
significant number said they believe North America will become even more
competitive by 2012 in sales and marketing (45 percent), information
technology (41 percent), customer service (37 percent), R&D/engineering (36
percent) and finance/accounting (34 percent). A small percentage predicted
that North America will be less competitive globally in these areas by
2012, with the balance being neutral.
"While globalization will continue and some manufacturing jobs will
follow, North America is showing significant resiliency, based on the plans
of these executives," said Craig Giffi, a Deloitte LLP vice chairman and
the U.S. Consumer & Industrial Products industry leader.
The survey also shed new light on how North American manufacturers view
free-trade agreements. Overall, manufacturers paint a positive picture of
their experiences with the North American Free Trade Agreement (NAFTA)
after almost 15 years, according to survey respondents.
In fact, North American manufacturers said they are confident about
their competitive position in the global marketplace, and expect that to
remain true for the next several years. The only dark spot is production
capability. Despite plans to expand in North America in the short term,
survey respondents painted a gloomy picture of this region's ability to
compete over the long run with lower-cost locations for production,
especially Asia.
More than half of survey respondents (61 percent) said they expect
North America to become even less competitive globally as a site for
production by 2012. The key barriers to making production competitive
globally were seen as labor cost (cited by 71 percent), tax policy (66
percent), work rules (66 percent), lack of availability of skilled labor
(51 percent) and costs of raw materials and energy (56 percent). Not
surprisingly, these were the issues most frequently cited by executives
surveyed as areas that governments should address as matters of public
policy.
By contrast, China and India were seen by executives surveyed as
becoming increasingly competitive as locations for production facilities.
For example, 37 percent of respondents said they plan to expand in China in
the next three years, and 24 percent in India.
As production shifts, manufacturers indicated they will move other
operations as well. For example, more than 48 percent of respondents said
they plan to expand sales operations in China over the next three years,
and 34 percent said they plan to do the same in India. Additionally, 27
percent plan service operations expansion in China and 23 percent plan to
do so in India.
"While the focus on expanding both production capacity and sales and
service in North America, China and India may seem like a contradiction,"
says Giffi, "it is evidence of the fact that to compete in the future,
manufacturers need to be able to grow in all major markets around the
world."
Giffi added, "The simplistic way to view manufacturing is to look only
where production is located. It's clear that a more accurate way to measure
the economic impact of these companies is to look at where all operations
are located, including sourcing, research and development, distribution,
finance, marketing, and all of the other functions necessary for a company
to thrive. In most cases, executives are telling us that North America
provides a competitive business environment for most of these activities."
About the Survey
Deloitte, Deloitte Canada and Deloitte Mexico, with the cooperation of
the National Association of Manufacturers (NAM), The Manufacturing
Institute, and Canadian Manufacturers & Exporters (CME), surveyed 321
executives of leading North American manufacturing enterprises across
product sectors to obtain their perspectives on their current and expected
future competitiveness. The majority of companies represented in the survey
(45 percent) are based in the United States. The survey responses have been
summarized and represent the opinions of the executive management of these
firms. No supplementary research has been added.
For more information and to download the complete survey results please
go to http://www.deloitte.com/us/NAFTA.
About Deloitte
As used in this document, "Deloitte" means Deloitte LLP. Please see
http://www.deloitte.com/us/about for a detailed description of the legal
structure of Deloitte LLP and its subsidiaries.
Contact: Allyson McKenney Liz Torrez
Public Relations Hill & Knowlton
Deloitte +1 312 255 3036
+1 203 708 4406 liz.torrez@hillandknowlton.comamckenney@deloitte.com